Monday, September 14, 2015

After climbing steadily since the
middle of last week, the EURUSD pair took something of a breather yesterday.
The Single Currency went into reverse, but only as far as the nice round number
of 1.1300. The exchange rate actually dropped below this level for a while, but
then buying pressure came back with such force as to propel it above this
support level one again.

Both the top and bottom of yesterday’s
trading were marked on the four hour chart by what are known in Technical
Analysis (TA) as pinbars. The one at the start of the day is quite pronounced.
A pinbar is defined as a price bar that is composed of a short body at one end
and a tail that is long relative to the overall size of the bar. In TA, the
idea is that this tail represents rejection by the market of the direction,
either long or short, in which it points. Aficionados regard a pinbar on the
four-hour chart to be of particular significance.

A pinbar is made up as follows:

The rectangle between the open and
close (the body of the bar) in this case is red, which means that it was a
falling price bar. If it were coloured green, it would be a rising bar, and the
open and close locations would be reversed.

The tail in this case (read in
conjunction with the colour of the body of the bar) indicated that the next
movement after the bar had completed was likely to be downward. And so it
proved after the start of yesterday’s trading. The pinbar that was formed then seems
to have had good predictive power.

As mentioned, and looking again at
the chart at the top, it will be seen that the green bar that was formed at the
end of the trading day was also a pinbar, although not so well formed. It came
into being when price was brought back to the support level of 1.1300. It will
be interesting to see if this bar has the same ability to predict the exchange
rate movement as its counterpart above. If it has, the pair will rise today.

US
retail sales later

The report that is likely to have
most impact on the US dollar today is the one showing US retail sales for last
month. This is closely watched by the markets and has the ability to move the
EURUSD pair strongly. It is to be expected that it could have a larger than
normal impact on this occasion, particularly if the figures are good, in light of
the FOMC two-day meeting which starts tomorrow, and which could conceivably
result in the first interest rate rise in the US in ten years.